What is the margin requirement in futures trading?*1 pointa) The initial payment made by the buyer or seller of a futures contractb) The interest rate charged on futures contractsc) The total cost of the futures contractd) The profit earned from trading futures

In the futures markets, if a futures contract is marked-to-market, this refers to the:Question 3Select one:a.interaction of the demand and supply forces in the market to determine the price of the options contract.b.interaction of the demand and supply forces in the market to determine the price of the futures contract.c.settlement of gains and losses on futures contracts on a daily basis.d.settlement of gains and losses on forward contracts on a daily basis.

A company enters into a long futures contract to buy 1,000 units of a commodity for $20 perunit. The initial margin is $6,000 and the maintenance margin is $4,000. What futures pricewill allow $2,000 to be withdrawn from the margin account?(5 marks)d) What is marking-to-market?(5 marks)e) Use the following data for gold and platinum futures (where prices are in dollars per troyounce and margin account balances do not earn any interest) to answer the questions thatfollow:Trading June Gold Futures April Platinum FuturesDate 100 troy oz. per contract 50 troy oz. per contractJan 20 1,594.50 1,874.50Jan 21 1,592.40 1,878.50Jan 22 1,597.70 1,883.10BE332-6-AU/3Suppose that you go short two contracts of April platinum futures on January 20 and longthree contracts of June gold on January 21. Then how much the value of your portfolio at theclosing of January 22 has changed by?(5 marks)(TOTAL: 25 MARKS)QUESTION TWOa) The basis strengthens unexpectedly. How does it affect the position of a short hedger?(5 marks)b) On March 1 the spot price of a commodity is $20 and the July futures price is $19. On June1 the spot price is $24 and the July futures price is $23.50. A company entered into a futurescontract on March 1 to hedge the purchase of the commodity on June 1. It closed out itsposition on June 1. What is the effective price paid by the company for the commodity?(5 marks)c) On March 1 the price of a commodity is $300 and the December futures price is $315. OnNovember 1 the price is $280 and the December futures price is $281. A producer enteredinto a December futures contracts on March 1 to hedge the sale of the commodity onNovember 1. It closed out its position on November 1. What is the effective price receivedby the producer?(5 marks)d) How many types of traders are there in a derivative security market and who are they?(5 marks)BE332-6-AU/4e) Suppose that the standard deviation of monthly changes in the price of commodity A is $2.The standard deviation of monthly changes in the futures price for a contract on commodityB (which is similar to commodity A) is $3. The correlation between the futures price and thecommodity price is 0.9. What hedge ratio should be used when hedging a one monthexposure to the price of commodity A?(5 marks)(TOTAL: 25 MARKS)END OF SECTION A

Yesterday, you entered into a futures contract to buy €62,500 at $1.50/€. Your initial margin was $3,750 (= 0.04 × €62,500 × $1.50/€ = 4 percent of the contract value in dollars). Your maintenance margin is $2,000 (meaning that your broker leaves you alone until your account balance falls to $2,000). At what settle price (use 4 decimal places) do you get a margin call?Group of answer choices$1.500/€none of the options$1.5280/€$1.4720/€

What is a futures contract?*1 pointa. A contract that gives the holder the right to buy an asset at a specific priceb. A contract that obligates the holder to sell an asset at a specific pricec. A contract that gives the holder the right to sell an asset at a specific priced. A contract that obligates the holder to buy an asset at a specific price

What is the main purpose of futures contracts?*1 pointa) To provide a guaranteed return on investmentb) To replace traditional investments like stocks and bondsc) To transfer risk from one party to anotherd) To eliminate the need for financial intermediaries